Unjust enrichment against Microsoft

United States Federal Circuit Court of Appeals Reports

THOMPSON v. MICROSOFT CORP., 06-1073 (Fed. Cir. 12-8-2006)
ROBERT D. THOMPSON, Plaintiff-Appellant, v. MICROSOFT
CORPORATION, Defendant-Appellee. No. 06-1073. United
States Court of Appeals, Federal Circuit. Decided December
8, 2006.

Appealed from United States District Court for the Eastern
District of Michigan.

Andrew Kochanowski, Sommers Schwartz, P.C., of Southfield,
Michigan, argued for plaintiff-appellant.

Constantine L.Trela, Jr., Sidley Austin, LLP, of Chicago,
Illinois, argued for defendant-appellee. William A.
Sankbeil and Fred K. Herrmann, Kerr, Russell and Weber, PLC
of Detroit, Michigan.

Before MAYER, BRYSON, and LINN, Circuit Judges.

Judge ARTHUR J. TARNOW.

Robert D. Thompson appeals from a dismissal by the United
States District Court for the Eastern District of Michigan
of Thompson’s unjust enrichment claim against Microsoft
Corporation (“Microsoft”). Thompson v. Microsoft Corp., No.
00-CV-74276 (E.D. Mich. Oct. 3, 2005). Although not raised
as an issue in the written submissions, we instructed the
parties to be prepared at oral argument to address the
question of whether this case “arises under” the patent laws
as contemplated in 28 U.S.C. § 1338. Because we
conclude that this court lacks jurisdiction over Thompson’s
appeal, we transfer the case to the United States Court of
Appeals for the Sixth Circuit.

BACKGROUND

In the early 1990s, a number of programmers were working on
enhanced, programmable folders for use in computer
operating systems like Windows. Thompson conceived and
developed software that used object-oriented
programming concepts to create programmable and extendible
folders for improved data storage, which Thompson called
“SmartFolders.” In January 1993, Thompson posted a question
to a computer forum seeking assistance on a bug he
encountered when trying to incorporate Windows’ clipboard
feature into SmartFolders. Thompson alleges that a
representative of Microsoft’s Developer Relations Group
contacted him to assist in solving the problem and that
Thompson sent part of his software to that representative
in January 1993. Shortly afterward, Rick Segal, another
member of the Developer Relations Group, allegedly contacted
Thompson regarding co-marketing opportunities for
the SmartFolders software at the Windows World trade show
in May. In furtherance of that opportunity, Thompson
developed a version of SmartFolders for Microsoft’s
upcoming Windows NT operating software and allegedly sent
that version to Microsoft on April 23, 1993. Thompson
concedes that he did not enter into any
non-disclosure agreement or other formal contractual
relationship with Microsoft. Thompson nevertheless alleges
that he shared the technology in confidence and with the
understanding that Microsoft would not appropriate the
technology for its own use.

Thompson alleges that, without his knowledge, a Microsoft
presenter at the OLE 2.0 Conference publicly discussed
Thompson’s SmartFolders technology and claimed it as a
Microsoft product on May 3, 1993. During the Windows World
trade show from May 19 § 24, 1993, Thompson
demonstrated and distributed the commercial version of the
SmartFolders software and provided written materials that
described the product.

On May 2, 1994, Microsoft filed a patent application for a
programmable folder technology, which resulted in U.S.
Patent Nos. 5,682,532 and 5,771,384 (the “Microsoft
patents”). During prosecution of the Microsoft patents, the
inventors disclosed Thompson’s software as relevant prior
art, and a press release describing the software was cited
as a reference on the face of the issued patents.

On August 23, 2000, Thompson filed a one-count
complaint for unjust enrichment against Microsoft in
Michigan state court based on Microsoft’s alleged
misappropriation, patenting, and use of Thompson’s
intellectual property. Microsoft removed the action to
federal district court, alleging diversity jurisdiction
under 28 U.S.C. § 1332 and federal question
jurisdiction under 28 U.S.C. § 1338(a). Thompson
filed an amended complaint, again alleging only unjust
enrichment under Michigan state law. Specifically, the
complaint averred:

7. Plaintiff’s disclosure and discussion of his
proprietary software technology with Defendant was made at
the request of Defendant and with the explicit and/or
implied promise that Defendant would not appropriate said
proprietary technology for its own use. * * * 15.
Defendant has been unjustly enriched by its unauthorized,
unlawful and unjust misappropriation, patenting, and use
of Plaintiff’s intellectual property, including, without
limitation, the use of technology not invented by
Defendant, and the benefit garnered by obtaining, using,
and owning two patents to enhance its patent portfolio,
value of its intellectual property, and for cross
licensing with competitors or others.

(Compl. at 2, 4.) Microsoft averred in its answer that
Thompson’s claim was preempted by federal patent law.

On January 14, 2002, Microsoft moved for summary judgment;
that motion was denied. On September 12, 2002, the district
court stayed the case pending the outcome of an
interlocutory appeal to the Federal Circuit in
Ultra-Precision Manufacturing, Ltd. v. Ford Motor Co.,
No. 01 – CV § 70302 (E.D. Mich. Sept. 5,
2001), which also involved the question of whether an
unjust enrichment claim under Michigan law was preempted by
federal patent law. We dismissed the interlocutory appeal in
Ultra-Precision for lack of jurisdiction without
consideration of the preemption issue.
Ultra-Precision Mfg., Ltd. v. Ford Motor Co., 338 F.3d 1353, 1358
(Fed. Cir. 2003).

The district court lifted the stay in this case in October
2003, and in June 2004, Microsoft filed a renewed motion
for summary judgment. Proceedings were again stayed,
however, pending our decision on the appeal from the final
judgment entered after remand in Ultra-Precision.
On June 15, 2005, we held that the unjust enrichment claim
as pled in Ultra-Precision was preempted by
federal patent law and affirmed the district court’s
decision on that issue. Ultra-Precision Mfg., Ltd.
v. Ford Motor Co., 411 F.3d 1369, 1382 (Fed. Cir.
2005).[fn1] In reaching that conclusion, we noted that the
appellant’s complaint did not plead that the appellee
received any incremental benefit over and above the benefit
the general public received from ideas that had been placed
in the public domain. See id. at 1379 § 81.

Following our decision in Ultra-Precision,
Microsoft and Thompson submitted supplemental briefs in
this case to the district court. The district court held a
hearing on Microsoft’s motion on September 28, 2005.
Thompson conceded that, according to Ultra-Precision,
a substantial part of the original damages claim
was preempted by federal patent law. During the hearing,
however, Thompson’s counsel moved for the district court to
treat the amended complaint as having included a request
for the type of “incremental benefit” damages identified by
our decision in Ultra-Precision. The court granted
Thompson’s motion. After much discussion, the district
court ultimately concluded that “we are arguing about what
should be argued in patent courts. And it’s preempted.”
Accordingly, the district court granted Microsoft’s motion
for summary judgment and dismissed Thompson’s claim for
unjust enrichment.

Thompson filed a timely appeal to this court, alleging that
his claim involves a substantial question of patent law
according to 28 U.S.C. § 1338(a) and that we have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

As a threshold matter, we must first determine whether this
court has jurisdiction over the appeal.”Whether this court
has jurisdiction over an appeal taken from a district court
judgment is a question of law which we address in the first
instance.” Pause Tech. LLC v. TiVo Inc., 401 F.3d 1290,
1292 (Fed. Cir. 2005). “Federal courts are not courts of
general jurisdiction; they have only the power that is
authorized by Article III of the Constitution and the
statutes enacted by Congress pursuant thereto. . . . For
that reason, every federal appellate court has a special
obligation to satisfy itself . . . of its own jurisdiction
. . . .” Bender v. Williamsport Area Sch. Dist., 475 U.S.
534, 541 (1986) (internal quotation marks and citations
omitted); see also Kinetic Builder’s, Inc. v. Peters, 226
F.3d 1307, 1311 § 12 (Fed. Cir. 2000).

Section 1295(a)(1) of Title 28 grants the Court of Appeals
for the Federal Circuit exclusive jurisdiction over “an
appeal from a final decision of a district court of the
United States . . . if the jurisdiction of that court was
based, in whole or in part, on [28 U.S.C.] section 1338 . .
. .” Section 1338(a), in turn, provides in relevant part
that “[t]he district courts shall have original
jurisdiction of any civil action arising under any Act of
Congress relating to patents . . . .” Thus, we must
determine whether this is a case “arising under” federal
patent law such that the jurisdiction of the district court
was based at least “in part” on section 1338.

In Christianson v. Colt Industries Operating Corp., the
Supreme Court held that jurisdiction under section 1338(a)
extends “only to those cases in which a well-pleaded
complaint establishes either [1] that federal
patent law creates the cause of action or [2] that the
plaintiff’s right to relief necessarily depends on
resolution of a substantial question of federal patent law,
in that patent law is a necessary element of one of the
well-pleaded complaints.” 486 U.S. 797, 808
§ 09 (1988). Here, there is no question that the
state law of Michigan, and not federal patent law, creates
Thompson’s unjust enrichment claim. The relevant question
therefore centers on whether patent law is a necessary
element of Thompson’s well-pleaded unjust
enrichment claim.

Although Thompson’s complaint alleges that Microsoft filed
a patent application for intellectual property that
Thompson invented, such a fact — even if true
— is not a necessary element of Thompson’s claim.
Thompson pleads that he shared proprietary information with
Microsoft under certain conditions, that Microsoft used
this proprietary information without Thompson’s knowledge
or permission, and that Microsoft was unjustly enriched by
its misappropriation, patenting, and use of that
proprietary information. Such a pleading is not limited to
the fact that patents were obtained; rather, Microsoft’s
alleged unauthorized use of the proprietary information
supports the count of unjust enrichment on its own. Indeed,
at oral argument Thompson’s counsel verified this
interpretation of the pleadings by acknowledging that
inventorship is “irrelevant” and “not critical” to the
pleaded cause of action and that Thompson can succeed in
the unjust enrichment claim without proving improper
inventorship. Because inventorship is not necessary to the
success of Thompson’s unjust enrichment claim, and because
“a claim supported by alternative theories in the complaint
may not form the basis for [section] 1338(a) jurisdiction
unless patent law is essential to each of those theories,”
Christianson, 486 U.S. at 810, Thompson’s well-pleaded
complaint does not establish that the right to
relief necessarily depends on resolution of a substantial
question of federal patent law. Thus, the district court’s
jurisdiction does not “aris[e] under” section 1338.

Moreover, Microsoft’s defense on preemption grounds does
not provide this court with jurisdiction over the appeal.
“[A] case raising a federal patent — law defense
does not, for that reason alone, ‘arise under’ patent law,
‘even if the defense is anticipated in the plaintiff’s
complaint, and even if both parties admit that the defense
is the only question truly at issue in the case.'”
Christianson, 486 U.S. at 809 (quoting Franchise Tax Bd. of
Cal. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 14
(1983)).[fn2] We therefore conclude that we lack
jurisdiction over this appeal.

When jurisdiction is lacking, “the court shall, if it is in
the interest of justice, transfer such action or appeal to
any other such court in which the action or appeal could
have been brought at the time it was filed or noticed.” 28
U.S.C. § 1631. We consider it to be in the interest
of justice to transfer the present appeal to the
appropriate appellate court for further proceedings.
Because this case was appealed from a final judgment of the
United States District Court for the Eastern District of
Michigan, we direct that the appeal be transferred to the
United States Court of Appeals for the Sixth Circuit.

TRANSFERRED

COSTS

No costs.

[fn1] The appellant in Ultra-Precision also
appealed the district court’s ruling denying its claim for
correction of inventorship. 411 F.3d at 1376. We affirmed
the district court’s judgment on that issue. Id. at 1383.

[fn2] We note that, in determining whether federal question
jurisdiction exists, the Supreme Court has held that “[o]ne
corollary of the well-pleaded complaint rule . . .
is that Congress may so completely pre-empt a particular
area that any civil complaint raising this select group of
claims is necessarily federal in character.” Metro. Life
Ins. Co. v. Taylor, 481 U.S. 58, 63 § 64 (1987).
Thus, in some instances, an area of law is so clearly and
completely preempted that a complaint in such an area of
law may present a federal question even though it raises
only state law causes of action. See, e.g., id. at 67
(holding claims within the scope of section 502(a) of ERISA
completely preempted); Avco Corp. v. Aero Lodge No. 735,
Int’l Assoc. of Machinists and Aerospace Workers, 390 U.S.
557, 560 (1968) (holding claims within the scope of section
301 of the LMRA completely preempted). Thompson’s claim is
not within the scope of such an area of law. See Bonito
Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 152
§ 57 (1989) (recognizing that the broadest reading
of its precedent on the preemptive effect of federal patent
law “would prohibit the States from regulating . . . the
tortious appropriation of private information” and
rejecting such an “ipso facto preemption” reading of federal
patent law).